Oil gains as OPEC defies Trump and sticks to supply cuts

LONDON (Reuters) – Oil rallied for a second day on Wednesday, buoyed by an unexpected decline in U.S. crude inventories and after Saudi Arabia appeared undaunted by pressure from U.S. President Donald Trump on OPEC to prevent steeper price rises.

FILE PHOTO: An oil pumpjack is seen in Velma, Oklahoma U.S. April 7, 2016. REUTERS/Luc Cohen

Saudi Energy Minister Khalid al-Falih said OPEC and its partners were “taking it easy” in response to a tweet from Trump on Monday that called on the group to slacken its restrictions on crude production. The tweet triggered the biggest one-day drop in the futures price so far this year.

“The 25 countries are taking a very slow and measured approach. Just as the second half of last year proved, we are interested in market stability first and foremost,” Falih said in Riyadh when asked to comment on Trump’s tweet, CNBC reported.

The oil price has risen by almost a quarter so far this year, after the Organization of the Petroleum Exporting Countries, together with other producers such as Russia and Oman, agreed to cut output to avoid the build-up of a global surplus, particularly as U.S. output has boomed.

Brent crude futures rose 71 cents to $65.92 a barrel by 1445 GMT, while U.S. futures rose $1.13 to $56.63 a barrel.

“Donald Trump tweeted and OPEC replied. It was not the message he wanted to hear so the story is not over yet,” PVM Oil Associates strategist Tamas Varga said.

Commerzbank analysts said Trump’s comment was likely to have been triggered by the sharp rise in U.S. gasoline prices, which have risen by more than 16 percent in the last month, compared with a near-6 percent rise in U.S. crude futures.

Based on current market data, the so-called OPEC+ group is “likely to continue with the production cuts until the end of the year”, a Gulf OPEC source told Reuters on Tuesday.

Russian energy minister Alexander Novak also said this week the oil market was more or less stable and price volatility, which is unwelcome to both producers and consumers, was low.

Also underpinning the market was a surprise drop in U.S. crude inventories, which fell by 4.2 million barrels in the latest week, according to the American Petroleum Institute. This compared with forecasts in a Reuters survey for a rise of 2.8 million barrels. [EIA/S]

Official data will be released by the U.S. Energy Information Administration (EIA) after 1800 GMT on Wednesday.